Last month saw the outcome of a five-year struggle between the City of Cape Town and the department of mineral resources & energy to allow the city to procure electricity directly from independent power producers. Frustratingly for the city, the court failed to pronounce on the merits of the application and simply referred the matter back to the parties to resolve.
Given the clear lack of interest by mineral resources and energy minister Gwede Mantashe to allow such power procurement processes to go forward, the judgment in effect puts the city, and by extension all municipalities in the country, in limbo. What will it take for the courts to recognise that municipalities simply cannot rely on Eskom’s overpriced and unreliable power in the future?
I can’t help but feel that after years of deliberate obfuscation to avoid breaking Eskom’s stranglehold on electricity generation, just desserts are coming to the line for the department. The march of history is afoot, and neither by hook nor by crook is there a way to avoid the inevitability of renewable energy’s advantages over Eskom’s dirty, expensive and unreliable fleet.
The reality is that at less than R1/kWh for small-scale solar it simply does not make sense to keep paying municipalities the R1.5/kWh to R1.80/kWh average asking price for Eskom power. Wise municipalities saw this coming some years back and the small scale embedded generation (SSEG) guidelines were developed to provide a system that would keep electricity users from migrating off-grid entirely. Little surprise then that the market for distributed solar grew from 3MW in 2010 to 200MW in 2016, with only the Integrated Resource Plan (IRP) 2019 update cap of 500MW per annum holding it in check.
Even there Eskom’s bungling has paved the way for the demise of its monopoly. Due to Mantashe’s deprioritisation of a rapid rollout renewable component of the IRP there was little choice but for the approved policy to forego an annual limit on the allocation of distributed generation between 2019 and 2022, stating that the allocation would be determined by the extent of the short-term capacity and energy gap. The IRP estimates that up to 6,000MW could be added to the grid by embedded generation over this four-year period alone.
It doesn’t take a crystal ball to see only two likely outcomes. Residents and businesses could opt for cheaper, cleaner and more reliable own-generation solar power and kiss municipal supply goodbye altogether. Or municipalities pull out the stops and develop their own mechanisms for financing and installing rooftop solar and turn electricity consumers into electricity prosumers.
At 25% of average national municipal revenue (second only to grants and subsidies at 28.4%), electricity sales form a critical pillar of financial sustainability for municipalities. Allowing the first outcome would be a national disaster, so the only viable outcome is the second option.
At this point, 41 SA municipalities have published SSEG regulations, more than half of them in the Western Cape. A 2018 study by green economy powerhouse GreenCape found that opportunities in the national green energy sector have the potential to generate 7,000 to 8,000 new direct jobs per annum. It states that rooftop solar PV now has a total annual available market of R5bn and total available market of R75bn by 2035.
Better yet, effective structuring of SSEG tariffs have resulted in findings such as the study into “the impact of residential rooftop solar PV on municipal finances: An analysis of Stellenbosch” reflecting a maximum reduction in total electricity revenue of only 2.4%.
How ironic that Mantashe will meet a renewable energy destiny on the road he took to avoid it.
• Maguire holds a master's degree in global change studies from Wits and has developed green economy solutions for the private sector, NGOs and the state for more than a decade.
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